Business Reporter

Australian shares fell today, weighed down by mining and energy stocks, as the wave of confidence from monetary easing among overseas central banks wanes.

The benchmark S&P/ASX200 index dropped 22.8 points, or 0.5 per cent, to 4385.5, while the broader All Ordinaries lost 21.6 points, or 0.5 per cent, to 4409.2.

Among the sectors, materials led the decline, falling 1.3 per cent, while energy lost 1 per cent and financials slipped 0.2 per cent. Health bucked the trend, adding 0.7 per cent.

CommSec markets analyst Steven Daghlian said losses were not unexpected after Wall Street finished down on Friday.

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"The fact that both (materials and energy) ... fell was more than enough to pull the rest of the market into the red," Mr Daghlian said noting that these two sectors combined make up about 30 per cent of the market.

Worries about China

BHP fell 0.9 per cent to $33.41, rival Rio Tinto lost 2.4 per cent, to finish at $54.97 and Fortescue dropped 0.3 per cent to $3.60.

With the Australian economy so heavily tilted towards Chinese growth, manufacturing data from the world’s second largest economy, due out Friday, will be one of the key factors for the week.

‘‘We’ve seen a little bit of a negative trend in China recently, or at least contraction in the manufacturing space, so if we continue to see that, markets aren’t going to react in a positive light,’’ said Mr Daghlian.

Back home, gold miner Newcrest, which was trading ex-dividend, fell 2.6 per cent to $28.14 as gold prices pulled back from near-seven month highs. The company also announced last week that its operation in Papua New Guinea is operating at 25 per cent of capacity due to an electrical issue.

The spot gold price was down about 0.7 per cent to $US1761 an ounce.

Among the big banks, ANZ dropped 0.6 per cent to $24.70, CBA lost 0.1 per cent, Westpac fell 0.2 per cent, while NAB broke the trend, adding 0.4 per cent to finish at $25.50.

Focus turns to Spain

Speculation that Spain will unveil a bailout program later this week gave investors something to hope for, but with French President Francois Hollande and German Chancellor Angela Merkel unlikely to agree on a banking union which would give the European Central Bank power to supervise all eurozone banks from January 2013, the confidence soon diminished.

The two leaders must agree upon a plan by October 10, or abandon it completely.

‘‘Germany is obviously in no rush to do that because the current situation in Europe will ultimately have them being the guarantor for most of these debts. They’re in no hurry to do that without a proper plan in place,’’ said IG Markets analyst Stan Shamu.

Mr Shamu said he expected the Australia market to finish higher for the quarter, but believed results could be better.

‘‘We just seem to be stuttering at that 4400 level, the most disappointing thing is that there is all this money being flooded into the system but the Aussie market hasn’t even tested this year’s high, unlike other major markets around the world,’’ he said.